Commentary

Gaza clash bonanza for Israeli anti-missile system

Commentary: Winner in Israel-Hamas clash is costly, but efficient, innovation

By

AmotzAsa-El

Columnist

Reuters

An Iron Dome launcher fires an interceptor rocket in the southern city of Ashdod, about an hour after a ceasefire between Israel and Hamas went into effect, on Nov. 21, 2012.

JERUSALEM (MarketWatch) — With rockets, bombs and missiles flying between Gaza and Israel continuously for a full week, you would expect some market volatility in Tel Aviv.

Instead, when the ceasefire had yet to be announced, the TA-25 index of blue-chip firms settled 0.4% higher than its level before the fighting began. The shekel traded before the announcement at 3.916 to the dollar, pretty much where it was a week earlier, 3.918 shekels.

The reason is simple. By the bout’s third day, it became clear that Israel’s heavily invested reply to a massive rocket attack was a success. With the Israeli-made Iron Dome missile interceptor downing some 90% of the missiles fired at residential areas between Beersheba and Tel Aviv, the markets figured that insofar as the economy is concerned, the Gazan missile threat’s impact will be limited.

Triple-phase system

Iron Dome is a triple-phased system that detects when a hostile missile is fired, deciphers its payload and destination — to avoid wasting its $30,000 activation on a missile that is headed nowhere — and homes in on the enemy missile and detonates it in midair.

The system’s development has already cost Israel more than $1 billion and the latest fighting has made the Ministry of Defense request an additional nearly $200 million to accelerate its production and station batteries throughout the Jewish State.

Israel, Hamas agree to cease-fire

Given the cost, the government six years ago heatedly debated whether to go ahead with the system. Now the decision to produce Iron Dome is universally hailed, and some have declared it as the recent fighting’s winner.

In other words, just as the American Civil War brought the revolver and the machine gun, World War I was decided by the tank and World War II gave rise to radar, Israel’s clashes with Hamas and Hezbollah have now borne a weapon that may soon become a staple of strategic defenses.

Benefitting from a half-century of experience in missile development, state-owned Rafael Advanced Defense Systems developed Iron Dome together with radar-technology specialists Elta, a subsidiary of Israel Aerospace Industries. Ironically, IAI’s manufacturing is located partly in Ashdod, a coastal city south of Tel Aviv that absorbed much of the rocket fire in this showdown.

Cost estimates

Just who won what in this conflagration, and by how many points, will now be a matter of discussion for some time.

As the cease-fire approached, the Israeli media estimated that the war cost the economy more than a quarter-billion dollars. Most notably, work was disrupted in some 500 factories throughout southern Israel, and production was halted altogether in some 70 plants.

In addition, as Israel prepared for a ground operation, the call-up of some 50,000 reserve soldiers cost more than $26 million, reflecting their accommodation and training and their absence from their civilian jobs. On top of that, direct damage to civilians’ houses and other property has been estimated at some $7.7 million.

In sum, this confrontation’s impact on the Israeli economy has been something like Hurricane Sandy’s on New Jersey. Yes, there will be a lot of rebuilding to do but there will be no macroeconomic damage. That is why representatives of S&P just told the business daily Globes that they do not expect the Gaza violence to dent Israel’s credit rating.

Clearly, the successful detonation of rockets above Tel Aviv, a spectacle the whole world watched, was a major strategic failure for Hamas, whose quest was to hit central Tel Aviv and leave a scene of great bloodshed and carnage. Indeed, its missiles’ failure to kill more than a handful of Israelis starkly contrasts with Hezbollah’s killing of 44 Israeli civilians and wounding 2,000 during the second Lebanon war in 2006.

Broader effort

Iron Dome’s success is part of a broader anti-missile effort in Israel. Its main products are the Arrow missiles, which are designed to intercept long-range rockets, like those with which Iran has been threatening Israel in recent years. Then there is Magic Wand, which is designed to confront missiles with ranges shorter than those that the Arrow targets but longer than the cross-border launches neutralized by Iron Dome.

However, the Arrow and Magic Wand have not been battle-tested. Iron Dome was first successfully activated last year, when it intercepted a Soviet-made Grad missile fired at the city of Ashkelon, and now it intercepted some 400 missiles fired during a full week of salvos from Gaza into Israel.

Nothing can serve an industrial product better than the kind of exposure Iron Dome was just handed, free of charge, by Hamas. Among hundreds of millions worldwide who saw on TV how it pursues and snatches its targets, to the applause of an entire metropolis, were foreign governments. Reportedly, those for now include India and South Korea.

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The system’s relevance for the South Koreans is obvious, as they have to consider the prospect of an unpredictable North Korea one day lobbing missiles a-la Hamas toward Seoul, which is closer to its northern enemy than Tel Aviv is to Gaza. As for India, its more pressing concerns are confronting terror, which means Iron Dome may be relevant for more export destinations than initially assumed.

And with some adjustment, parts of the system may also be relevant for protecting civilian aviation from various ballistic threats.

Set against this backdrop, Iron Dome in coming years is likely to return some of the Israeli and American investments in it; financial investments, that is. Strategically, the investment has already paid off.

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